After yesterday's blowout, record 3Y auction, it seemed as if it was all downhill from there: after all, it would be difficult to repeat that particular stellar results with today's 10Y refunding auction. And while today's sale of $35BN in 10Y paper wasn't nearly as exciting, it was anything but ugly. In fact, aside for the modest tail which has becomea staple of 10Y auctions, it was rather solid.

Pricing at a high yield of 3.448%, barely down from last month's 3.455%, the auction tailed the 3.439% When Issued by 0.9bps; it was also the 3rd consecutive tail and the 15th tailing 10Y auction of the past 19. One can assign the tail to the post-CPI rally into the auction which saw yields slide from 3.50% to 3.45%.

The Bid to Cover was 2.45, up from last month's 2.36 and above the recent average of 2.41.

The internals were also solid with Indirects awarded 67.5%, above last month's 63.0% and well above the 64.8% six-auction average. And with Directs awarded 19.5%, roughly the same as last month and above the 18.3% recent average, Dealers were left with 13.0% of the auction, one of the lowest prints on record.

Overall, this was a solid auction, and while not as stellar as yesterday's record 3Y, largely because of the modest tail, one can explain the tail with today's solid rates rally; if one ignores that, then it is clear that buyside demand for US paper is only rising, and making it clear that few buyers have any debt ceiling/default fears.

(Click on image to enlarge)

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